A detailed ppt on Penalties and Prosecution followed by a table on offences

1. PENALTIES

2. Meaning
The term Penalty has not been defined under the Income
Tax Act, 1961 (Act).
❖ Punishment; Suffering or loss imposed for breach of a law; a
fine or loss agreed upon in case of non-fulfilment of some
undertaking; a fine
- Chambers 20th Century Dictionary, 1983Edition
❖ Penalty is a liability composed as a punishment on the party
committing the breach of contract. Agreement to pay at
default interest at a higher rate does not amount to penalty.
- P Ramanatha Aiyar’s Law Lexicon , 2nd Reprint Edition2009
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3. Sec 271 – Failure to furnish returns, comply with
notices, concealment of income etc.
❖ If the Assessing Officer or Commissioner (Appeals) or
Commissioner in the course of any proceedings under this
Act, is satisfied that any person –
• has failed to comply with a notice
• has concealed the particulars of his income or
furnished inaccurate particulars of such income, or
• has concealed the particulars of the fringe benefits or
furnished inaccurate particulars of such fringe benefits
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4. Sec 271 – Contd…
❖ The person may be directed to pay penalty :
Section Penalty
271(1)(b) Rs. 10,000
271(1)(c) 100- 300% of tax sought to be evaded
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5. Sec 271 (1B) – Satisfaction of AO for Initiation of
Penalty
❖ Assessment order deemed to constitute satisfaction of
the Assessing Officer :
▪ On addition or disallowance of any amount in
computing the total income in an assessment order;
and
▪ The penalty proceedings have been initiated under
section 271(1)(c)
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6. Sec 271AAA – Penalty where Search has been
initiated
❖ Search initiated after 1.06.2007 but before 01.07.12
▪ Penalty at the rate of 10% of the undisclosed
income of the specified previous year
▪ No penalty under section 271(1)(c) in respect of
undisclosed income
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7. ❖ Search initiated after 1.06.2007 but before 01.07.12
Sec 271AAA – Contd…
Conditions
Penalty not applicable
1. Assessee admits the undisclosed income
2. Assessee specifies and substantiates the
manner of deriving undisclosed income
3. On or before the specified date-
Pays the tax together with interest on
undisclosed income
4. On or before the specified date-
Furnishes the return of income for the
specified year declaring such undisclosed
income
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8. ❖ Search initiated after 01.07.12
Sec 271AAB – Penalty where Search has been
initiated
Conditions Penalty
1. Admits the undisclosed income
10% of undisclosed income
2. specifies and substantiates the manner
of deriving undisclosed income
3. On or before the specified date-
Pays the tax together with interest on
undisclosed income
4. On or before the specified date -
Furnishes the return of income for the
specified year declaring such
undisclosed income
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9. ❖ Search initiated after 01.07.12
Sec 271AAB – Contd…
Conditions Penalty
1. Does not admit the undisclosed
income
20% of undisclosed income
2. On or before the specified date-
Pays the tax together with interest on
undisclosed income
3. On or before the specified date –
Declares such income in the return of
income furnished for the specified
year
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10. Sec 271AAB – Contd…
❖ Search initiated after 01.07.12
▪ In any case not covered above, penalty shall not be
less than 30% and shall not exceed 90% of such
undisclosed income.
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11. Sec 271D and 271E - Failure to comply with the
provisions of section 269SS and 269T
Section Conditions Penalty
271D
Acceptance of loans/deposits in
contravention to section 269SS
Shall be liable for penalty at
the rate of 100% of such loans
/ deposits that are
accepted/repaid.
271E
Repayment of loans/deposits in
contravention to section 269T
It shall be imposed by the
Joint Commissioner.
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12. Sec 271C – Penalty for failure to deduct tax at source
❖ If any person fails to –
▪ Deduct the whole or any part of tax as per Chapter XVII-B;
▪ Pay the whole or any part of the tax a required by or under
➢ Section 115-O(2); or
➢ the second proviso to section 194B
❖ Attracts Penalty to the extent of tax to be deducted or paid
as aforesaid
❖ Penalty shall be imposed by Joint Commissioner
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13. ❖ Person in respect of International Transaction or specified
domestic transaction
Section 271AA :
Sec 271AA and Sec 271G
Particulars Conditions Penalty
Without prejudice to provisions of section 271 or 271BA
Failure to keep,
Fails to keep and maintain
books as required by section
92D(1) or sec 92D(2) 2% of the value of
each international
transaction or
specific domestic
transaction
maintain or retain
2. Fails to report such
transaction which he is
required to do so
books of account,
documents, etc. in
respect of certain
3. Maintains or furnishes an
incorrect information or
document
transactions
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14. ❖ Person in respect of International Transaction or specified
domestic transaction
Section 271G :
Sec 271AA and Sec 271G
Conditions Penalty
Failure to furnish information or document
within 30days from receipt of notice as
required under section 92D
2% of the value of each
international transaction or
specific domestic transaction
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15. Others
Section Particulars Penalty
271A
Failure to keep, maintain or retain books
of accounts, documents etc.
Rs. 25,000
271B Failure to get accounts audited u/s 44AB
0.5% of total sales,
turnover or gross
receipts or Rs.
1,50,000/-
Whichever is less
271BA Failure to furnish report u/s 92E Rs. 1,00,000
271F Failure to furnish return of income Rs. 5,000
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16. Sec 273B – Penalty not to be imposed in certain
cases
❖ Notwithstanding anything contained in the provisions of
sections
271 (1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C,
271CA, 271D, 271E, 271F, 271FA, 271FB, 271G, 271H,
272A(1)( c), 272A(2)(d), 272AA(1), 272B, 272BB(1) &
(1A), 272BBB(1),273(1) (b),273(2) (b),(c)
❖ no penalty shall be imposable on the person or the assessee,
as the case may be, for any failure referred to in the said
provisions if he proves that there was reasonable cause for
the said failure.
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17. Sec 273A – Power to reduce or waive penalty, etc., in
certain cases
❖ The Commissioner may, reduce or waive the amount of
penalty under section 271(1)(iii)
▪ On disclosure of full particulars by the assessee of income,
prior to Assessing Officer detecting concealment of income
▪ Co-operation of assessee in all enquiries relating to the
assessment of his income
▪ Payment or satisfactory arrangement to make payment of
any tax and interest
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18. ❖ The Commissioner can waive or reduce penalty only with
prior approval of Chief Commissioner or Director General
in cases where the income on which the penalty is levied is
greater than Rs. 5,00,000
Sec 273A – Contd…
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19. Sec 273AA – Power of Commissioner to grant
immunity from penalty
❖ An Application may be made to Commissioner for granting
immunity from penalty, if:
▪ Application is made for settlement u/s 245C and the
proceedings for settlement have been abated under section
245HA; and
▪ The penalty proceedings have been initiated under this Act.
❖ Application for grant of immunity of penalty shall not be
made after imposition of penalty after abatement
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20. Sec 273AA – Power of Commissioner to grant
immunity from penalty
❖ The Commissioner may grant immunity from penalty if he is
satisfied that the assessee has given:
▪ Full co-operation with income tax authorities in
proceedings before him
▪ Made true disclosure of his income and the manner in
which such income has been derived
❖ Immunity granted stands withdrawn if the person fails to
comply with any condition subject to which the immunity
was granted
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21. Sec 274– Procedures
❖ No order imposing penalty under this Chapter shall be made :
▪ unless the assessee has been heard or has been given
reasonable opportunity of being heard;
❖ No order imposing penalty under this Chapter shall be made :
▪ By the ITO, where the penalty exceeds ten thousand
rupees;
▪ By the ACIT or DCIT, where the penalty exceeds twenty
thousand rupees except with prior approval of Joint
Commissioner
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22. ❖ Limitation for passing the order of penalty
Sec 275– Bar of Limitations for imposing
penalties
Condition Limitation
1. Assessments/Revision of order u/s
263 or 264
Six months from the end of the month
in which the order is passed
2. In case of Appeal to
Commissioner(Appeals) or
Appellate Tribunal
Expiry of the FY in which penalty
proceedings are completed or six
months from the end of the month in
which the CIT(A)/ITAT order is
received by CCIT or CIT
Whichever is later
3. In any other case
Expiry of the FY in which penalty
proceedings are completed or six
months from the end of the month in
which penalty is initiated
Whichever is later
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23. Sec 272BB – Failure to comply with provisions of
section 203A
❖ Wrong quoting of tax deduction account number or tax
collection account number or tax deduction and collection
account number in challans, certificates, statements or
documents referred to under section 203A(2)
❖ Assessing Officer may direct a penalty of Rs. 10,000
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24. Sec 273 – False estimate of, or failure to pay, advance tax
❖ Penalty in case of an assessee who furnished an advance tax
statement u/s 209A(1)(a) which he knew or had reasons to
believe to be untrue :
▪ 10% to 1 ½ times of the amount by which the advance
tax paid falls short of :
(1) 75% of the assessed tax as per section 215(5), or
(2) the actual amount of advance tax, had the assessee
furnished a correct statement as per section 209A(1),
Whichever is less
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25. Sec 273 – Contd…
❖ Penalty when assessee fails to furnish advance tax statement
u/s 209 (1)(a)
▪ 10% to 1 ½ times of 75% of the assessed tax as per
section 215(5)
❖ In case of company assessees, the provisions of this
section shall have effect after substituting the word “75 %”
with “83 1/3 ” wherever it occurs.
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26. Section 221 - Penalty payable when tax in default
❖ When an assessee is in default or is deemed to be in default
in making a payment of tax, he shall, in addition to the
amount of the arrears and the amount of interest payable
under sub-section (2) of section 220, be liable, by way of
penalty, to pay such amount as the Assessing Officer may
direct, and in the case of a continuing default, such further
amount or amounts as the Assessing Officer may, from time
to time, direct, so, however, that the total amount of penalty
does not exceed the amount of tax in arrears …….
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27. OFFENCES AND
PROSECUTION

28. Offences and Prosecution
❖ While penalties may be imposed by the income-tax
authorities, the imposition of fine or the launching of any
offence under the ACT can be made only by a Magistrate of a
Court under Section 275A to 280. In respect of the same
default of an assessee, penalty may be imposed and a
prosecution also may be launched against him.
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29. Why is Prosecution necessary?
❖ In the fight against tax evasion, the imposition of monetary penalty alone
is not sufficient. A calculating tax evader finds it profitable to evade tax
for years, if he knows that he may get away with it by paying penalty in
the year in which he is caught. However, the prospect of landing in jail is
a far more dreaded consequence and works as a deterrent. Further, for
more serious defaults, sometimes launching of prosecution is prescribed
without prescribing monetary penalties.
❖ The Parliament has, therefore, been enacting deterrent laws for effective
implementation of tax laws. The Income-tax Act contains a separate
chapter XXII wherein offences have been defined and punishment
provided.
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30. Offences punishable under the income tax act
❖ Removal, parting with or otherwise dealing with books of accounts,
documents, money, bullion, jewellery or other valuable article or thing
put under restraint during the search. [Section275A]
❖ Fraudulent removal, concealment, transfer or delivery of any property or
any interest in the property with the intention to thwart recovery of tax.
[Section 276]
❖ Failure on the part of a liquidator or receiver of a company to give notice
of his appointment to the Assessing Officer or failure to set apart amount
notified by the Assessing Officer, or parting away of company’s
properties in contravention of income-tax provision. [Section276A]
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31. Offences punishable under the income tax act
❖ Failure to enter into written agreement or failure to furnish the statement
of immovable property intended to be transferred u/s.269UC, or failure to
surrender or deliver the property u/s.269UE, purchased by the
Appropriate Authority or doing or omitting to do anything u/s.269UL,
which will have the effect of transfer of property without the permission
of the Appropriate Authority (under the provisions of Chapter XX-C)
[Section 276AB]
❖ Failure to pay to the credit of the Central Government the tax deducted at
source. [Section 276B]
❖ Failure to pay the tax collected at source. [Section276BB]
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32. Offences punishable under the income tax act
❖ Wilful attempt to evade any tax, penalty or interest [Section276C(1)]
❖ Wilful attempt to evade the payment of any tax, penalty or interest levied
under Income Tax Act. [Section 276C(2)]
❖ Wilful failure to furnish in due time return of income. [Section 276CC)]
❖ Failure to furnish return of income in Search Cases as required under
section 158BC [Section 276CCC]
❖ Wilful failure to produce accounts and documents as directed by issue of
notice under section 142(1) [Section276D]
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33. Offences punishable under the income tax act
❖ Wilful failure to get the accounts audited as directed by the Assessing
Officer under section 142(2A). [Section276D]
❖ Making of a statement in verification or delivery of an account or
statement which is false and which the concerned person knows or
believes to be false or does not believe to be true. [Section277]
❖ Abetting or inducing another person to make and deliver an account or
statement or declaration relating to any taxable income which is false and
which he either knows or believes to be false. [Section278]
❖ Punishment for 2nd & subsequent offences in cases of certain defaults.
[Section 278A]
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34. Offences punishable under the income tax act
❖ No person shall be punished for any failure if he proves that there is
reasonable cause failure. [Section 278AA]
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35. Who is liable to be prosecuted?
❖ Any person, committing the offence is liable to be prosecuted. In this
connection it is not necessary that the person should be an assessee under
the Income-tax Act. In the case of an offence committed by a Company,
Firm, Association of Persons or Body of Individuals, every person in
charge of or responsible for the conduct of the business of the concern as
well as the concern are deemed to be guilty. Similarly, in the case of an
offence by a Hindu Undivided Family, the karta thereof, is deemed to be
guilty of the offence.
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36. Summary of Offences and Prosecution in brief
Section Nature of Default Rigorous Imprisonment Fine
275A Contravention of order made under the
second proviso 132(2)or 132(1) regarding
search and seizure
Upto 2 years No Limit specified
275B Failure to afford necessary facility to
inspect the books of accounts or other
documents 132(1)(iib)
Upto 2 years No Limit specified
276 B Failure to pay to CG TDS or the tax
payable by him as required by 115(O)(2) or
second proviso to sec 194B
3 months to 7 years No Limit specified
276BB Failure to Pay TCS 3 months to 7 years No Limit specified
276C(1) Willful attempt to evade tax, penalty or
interest
Evaded Tax exceeding
25Lacks: 6 Months to 7
years other cases 3
months to 2 years
No Limit specified
276C(1) Willful attempt to evade tax, penalty or
interest
3 months to 2 years No Limit specified
276CC Willful failure to furnish in due time a ROI
u/s 139(1) or u/s 142(1) or 148 or 153A
Evaded Tax exceeding
25Lacks: 6 Months to 7
years other cases 3
months to 2 years(If less
than 3000 no prosecution)
No Limit specified
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37. Summary of Offences and Prosecution in brief
Section Nature of Default Rigorous Imprisonment Fine
276D Willful failure to produce books of
accounts u/s 142(1) or 142(2A)
Upto 1 year Rs. 4 to Rs. 10 for every
day default
277 False statement in verification Evaded Tax exceeding
25Lacks: 6 Months to 7
years other cases 3
months to 2 years(If less
than 3000 no prosecution)
No Limit specified
277A Falsification of books of accounts to
induce or abet any tax penalty interest
3 months to 2 years No Limit specified
278 Abetment if false return Evaded Tax exceeding
25Lacks: 6 Months to 7
years other cases 3
months to 2 years
No Limit specified
278A Second and subsequent offences 6 months to 7 years for
every subsequent
No Limit specified
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